Seeking Hidden Gem Cities for Duplex/Triplex Investment

[Judy Mueller]

Hello everyone,

I'm Judy Mueller, a real estate enthusiast from South Florida. As I dive into my investment journey, I find myself eager to explore markets outside the commonly discussed realms and would like to completely avoid California and New York. I'm particularly interested in duplexes or triplexes that might be able to offer positive cash flow within the first year.

I've spent countless hours researching cities, examining listings, and analyzing population growth trends, but I'm sure there are hidden gems (cities) I've yet to discover. So, I'm turning to this knowledgeable community for your invaluable insights. Have any of you had success with investments in under-the-radar cities? What unique factors should I consider? Your guidance could significantly streamline my research process and help me make more informed decisions.

Thank you in advance for sharing your experiences and advice. I look forward to your recommendations and being an active member of this forum as I just joined, and this is my first post!

[Lucas Thomas]

I'm stealing this from my other post I submitted on another post, but it's definitely what you need. I was a property manager who ran 100+ units and have purchased hundreds of rentals and cash-flowed them. 

I invest in several states and will simply give you the basics of what I want from a city when buying rentals!

#1: City-Metro (Including suburbs, etc.) Has to have a population over 500,000. With a population this size, you have less labor issues (more people to keep labor cheap), a built in growth machine for appreciation/rents due to babies born and people moving there, and the city is well-known.

#2: Landlord Friendly - call local property managers/eviction attorneys and see what the average eviction time is and if the judges give landlords a lot of trouble. Ask how its like to be a landlord in the state and if its a headache or loses money. Forget it.

#3: Check taxes and insurance for the state. Landlording is a LOW MARGIN business and high taxes or insurance will kill your margins quickly or not even give you any margins on the buy in the first place!

#4: Appreciation Play vs. Cash-flow Play - figure out why you're buying rentals in the first place. Appreciation or Cash-flow. You get both with any rental property, but sometimes you get more with "nicer" properties but not always. I only buy for Cash-Flow as I don't like putting money into an investment that can't pay for itself. Appreciation plays can start eating your regularly income if your not careful.

#5: Cash-flow plays are incredibly hard to do in most cities nowadays. The purchase prices, rent rates, and mortgage rates are so out of whack that its really hard to get cash-flow. But in general, here are some simple buy rules: You can't pay more than $200k for a SFH, can't pay more than $300k for a Duplex, 350k for a Triplex, and 400k for a Quadplex. Which averages out to about 100-125k per door. I personally don't buy anything over 85k a door, but people like "nice" stuff. You can go higher but can't break the 1% Rule.

#6: Master the Art of the Contractor Stable: I have thrived as a Landlord in several out-of-state markets (Purchasing Homes that are 120 years old) and the biggest thing is knowing how to build a contractor stable and being able to read an Inspectors Report and ask the right questions. With contractors, you always have to be a part of a group (Local Property Manager) or have enough rentals to build relationships with your contractors as they discount their labor for the consistency of work. I always buy many rentals in the cities I invest in so the labor can be fair priced. Other times, you have to always be shopping new labor as the "Contractor" Market is like a revolving door and sometimes, you will go through multiple contractors a year. Its the business.

Basically when I enter a new market, I fly in, meet all the potential property managers, learn the landlord basics, and find the labor as needed with the local agents/property managers to help me with snags. 

I buy Wisconsin, Ohio, and Michigan mostly now.